Italy’s treasury has denied its use of derivatives as a hedge on its huge debt pile posed any risk to public finances, following reports the country faced billions of euro in potential losses from one set of contracts.

The Financial Times and La Repubblica said the eight contracts, restructured at the height of the euro zone crisis in 2012, could result in combined losses of about €8 billion based on market prices on June 20th.

The newspapers, which quoted a report from the treasury, said the contracts had been taken out in the 1990s, some while European Central Bank president Mario Draghi was director general of the Italian treasury.

At that time the Italian government was trying to improve its accounts to meet tough criteria for euro membership by taking upfront payments from banks, the newspapers said.

The treasury said suggestions Italy had used such contracts to help it meet the entry criteria in 1999 were “absolutely baseless”.

La Repubbblica said the restructured deals expired between 2017 and 2040.

The treasury said it used derivatives as a standard means of hedging against foreign exchange and interest rate risks and there was always a cost for such insurance, which was justified by the protection against more serious potential losses.

“The market value of derivatives instruments at a specific time... cannot in any case be treated as an actual loss,” it said.

However, the government admitted in March 2012 it had paid US investment bank Morgan Stanley €2.57 billion to close derivatives contracts dating back to 1994.

Further losses would complicate Italy’s efforts to manage its finances in an increasingly risk-wary market, but even a potential figure of €8 billion would be dwarfed by the country’s overall debt pile, which stands at around €2 trillion.

The newspaper reports still prompted some unease in the banking community.

“(It) is not a huge amount in relative terms and I don’t think it will move the dial either way,” Enrico Cucchiani, the chief executive of Intesa Sanpaolo, Italy’s biggest bank, told Reuters.

“(But) it’s not good news. One might recall the famous line from Forrest Gump - ‘life is just like a box of chocolates, you never know what you’re going to get’.”

Also in March 2012, the government told lawmakers the treasury held derivatives contracts on some €160 billion, or almost 10 per cent of state bonds in circulation.

The newspapers said the 2012 restructurings allowed the treasury to stagger payments to banks over a longer period but in some cases at more disadvantageous terms.

The restructured contracts had a total notional value of €31.7 billion, they said.

“Many mistakes were made during the 1990s to get Italy into the euro and today those are turning into more debt, hidden in the official accounts,” La Repubblica quoted an unnamed government official as saying.

The treasury report on the contract was sent to Italy’s state auditors earlier this year, the Financial Times said, adding that the auditors were concerned by the numbers and requested the finance police to intervene.

The treasury said in its statement the financial police had only requested documents related to the now closed Morgan Stanley contracts, and the treasury had supplied all the required information.